The importance of an all-rounder

Ever since I have been writing  personal finance individuals within and outside my network have been reaching out to me for seeking advice about financial planning. Although I inform them to seek the guidance of a qualified financial planner, I do share my experience and insights on the same. Quit often, the best way to engage with an individual is to converse in a manner which he would understand.

One such person was Mr Anant. He would come to my office twice a month. For every hour that he would spend with me, for forty minutes he would speak about cricket. I used to be a cricket fan but not anymore. However old habits die hard and I continue to keep myself abreast about the game. However Mr Anant still followed the game as enthusiastically as most of us men did when we were young boys.

Once while explaining about different financial products I was trying to compare them with cricketers. So a small or a microcap equity fund could be compared with an aggressive batsman such as David Warner An insurance product that offered protection could be compared with a compact batsman like Cheteshwar Pujara. When the topic came to all rounders we invariably discussed about the glory days of all rounders like Imran Khan, Kapil Dev, Sir Ian Botham and Sir Richard Hadlee. Even Gary Sobers – possibly the greatest of them all was paid obeisance to. The last genuine all rounder was Jacques Kallis post which the cricketing world has seen a dearth of these magical players. Mr Anant couldn’t help but ask whether there is an equivalent for an all rounder in the financial space. He felt that he hadn’t come across a product which could also help him with different aspects of financial planning as most of them focused only on one aspect which were either wealth creation or protection. I replied that there is. And surprisingly it is a life insurance product. Just like how an all rounder could offer a three in one option for his team – batting, balling and fielding; this product can offer protection, wealth accumulation and wealth enhancement.

I spoke about Edelweiss Tokio- GCAP. It is a guaranteed returns plan which also offers life insurance coverage. I informed Mr Anant that firstly this offers protection in case of an unforeseen event. Secondly it is a product through which wealth can be accumulated for important milestones in life as it offers good returns. Thirdly wealth is enhanced thanks to the loyalty additions which are guaranteed. The fact that this is a tax saving plan, which offers tax benefits [80C and 10(10D)], makes it a well rounded product.

Mr Anant seemed satisfied that we could complete drawing suitable analogies. And like most days, we could never figure out how time flew by as another interesting session came to an end.

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Marriage is an agreement between two people to support and be with each other during good times as well as bad; sharing their joys and sorrows. One of the first financial decisions a couple makes together is creating a joint account. Over a period of time, they might even begin investing together, but what about health insurance? Most of us tend to assume that.. (to read the entire article visit aditya birla health blog - click here)

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Unforeseen circumstances are just that, ‘unforeseen’. There’s no way to know what is coming, especially when it comes to health or wellbeing, but there’s always a way to be prepared. Most of us who work for an organisation feel secure in the knowledge that our corporate health insurance scheme creates a protective shield for us and ...read more here.

8 easy ways to destroy wealth

(Image source: https://goo.gl/gvN4sv)

I usually write about creating wealth. A humid Monday night deserves a post on wealth destruction.

Here are 10 simple ways to destroy wealth:

Taking an education loan: Planning to pursue MBA from that top ranked Indian B School which promises lucrative placements? Let not the tuition fees of Rs 20 lakhs hinder your plans. Go ahead and get that education loan which the friendly neighbourhood public sector bank is offering. Check this calculator out through which you can easily calculate your education loan EMI. At an interest rate of 10.25% and a repayment period of 7 years your EMI is Rs 33,461. Assuming your starting salary is Rs 1,00,000 per month and taking into account other expenses it would be interesting to note how much you can actually end up saving of investing. The worst part of an education loan is that you cannot pursue a break or any dream of starting up unless you pay that amount off completely. And it becomes worse if the economy suddenly takes a downturn as you are stuck with either a job that doesn't pay well or you may not have a job at all!

Taking a housing loan: Had written about how it is better to rent a house rather than to buy one. There is also a popular joke:




Taking a housing and education loan destroy the opportunities you would have taken otherwise to create wealth rather than destroying wealth itself.

Timeshare: Timeshare is supposed to offer you benefits of spending holidays in the future at today' cost. One has to pay an upfront fee which in the case of a popular Indian company varies from Rs 2.5 lakhs to about Rs 17 lakhs. Apart from this one also needs to pay a maintenance fee every year. This fee can begin at Rs 17,000 every year and can go up. Timeshare forces one to take a holiday every year to get the best ROI and also does not account for other expenses like food and travel.

Let us do the maths -

Buying timeshare holiday ->

Cost of Timeshare holiday will be Rs 3 lakhs + Rs 17,000 (During Year 1) +Rs 17510 (During Year 2)+....+ Rs 34558 (During Year 25) [Considering inflation of 3%] = Rs 9,19,807

Have not even added the other costs such as for travel, food and the cost of losing freedom to holiday elsewhere because your money is locked here.

Starting SIP ->

Assuming just the maintainence fee of Rs 17,000 is divided by 12, we get Rs 1416.
Starting an SIP with this amount and increasing it by 3%  every year, we invest close to Rs 6,20,000 over 25 years.
A conservative return of just 14% can offer us a corpus of Rs 56.3 lakhs.
All this with the freedom of holidaying whenevr and wherever one wants.

Money back life insurance plan: This is the best way to destroy wealth. Purchase an endowment plan which, in any case, offers highly insufficient insurance coverage. Keep paying a huge amount as premium every year. Deal with the paltry yearly returns which are offered as scraps.

Not buying health insurance because your company offers it: Will you be covered when you are in your notice period? What if you suffer an accident then? Neither can you use your existing employer's health policy nor your future employer's policy. Some times the coverage might not be enough or certain aspects of the policy might have changed without you being intimated.

Not talking to children about money: This is one of the most popular ways of destroying wealth. Warren Buffet bought his first share at the age of 11. Business communities in India educate and expose young members in their families to the world of personal finance due to which they end up being financially savvy and literate as they grow older. This helps them preserve wealth over generations. The most important factor for creating wealth is time. The sooner children are taught about money and how it works, the better it is for their well being as adults. However in India discussing money with parents is almost as taboo as sex.

Trading without knowledge:  Wish to make a quick buck on a hot tip? Does getting rich fast through trading in futures and options tempt you?

Your first few bets were profitable and you feel you have mastered the art of trading?

Check out the Dunning Kruger Effect:



There is nothing worse than your first few bets being successful while trading especially if you are doing it only by instinct. The moment the tide changes you may lose everything that you have.

You don't automate it: Haven't automated your SIPs yet? This is a sure shot way to spoil the returns that can be offered by long term investing through systematic investment plans. One may forget or just be lazy to deposit the cheque. Setting up a auto debit SIP mandate ensures discipline as well as consistency.